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RIM board under increasing pressure to turf co-CEOs

As RIM's performance continues its steady slide, pressure is mounting on board of directors to resolve questions over co-CEOs.

By Vanessa LuBusiness Reporter

Fri., Dec. 30, 2011

Research In Motion’s board or is under pressure to make a leadership change, and quickly.

But it doesn’t look like Mike Lazaridis and Jim Balsillie, the co-CEOs and co-chairs of the Waterloo-based BlackBerry maker are going anywhere soon.

“There has got to be a lot of pressure on the board to have the chutzpah to force RIM and Lazaridis and Balsillie to make some very difficult decisions, decisions that I think they have put off for far too long,” said Mark Evans, a digital marketing strategist and a former tech journalist.

That means the board of directors may finally be forced to tackle the governance question, dumping the pair, replacing them or at least kicking them upstairs.

In July, the company avoided an investor vote to shake up its combined chair and chief executive management structure, agreeing instead to form a special committee to consider investor complaints.

That committee of independent directors is scheduled to deliver its report by Jan. 31, on the value of an independent chair, versus a lead director, which is RIM’s model. The board will publicly respond to the recommendations within 30 days.

Requests for an interview with lead director John Richardson went unanswered.

Richardson, who served as chairman of the Ontario Pension Board as well as a number of executive positions at insurance companies, was appointed RIM’s lead director in 2007.

That was the same year Balsillie stepped down as RIM’s chair amid questions of improperly backdating stock options. Balsillie and Lazaridis and other executives eventually reached a deal with the Ontario Securities Commission to pay millions in penalties and restitution.

Evans argues that RIM’s decision to study the governance situation does nothing for investor confidence.

“Balsillie and Lazaridis need to figure out what they want to do. They can’t be all things to all people,” Evans said. “They can’t do every single job. They have to hire or find the best people possible and let them do what they’re good at.”

Queen’s University business professor John Pliniussen, who specializes in technology, believes the co-CEOs simply have to go.

“It’s dysfunctional. It’s not working,” Pliniussen said, adding boards of directors can vary in terms of how hands-on or aggressive they are.

He describes RIM’s board as a laissez-faire model, not aggressive or forward-thinking.

Well-known business leaders sit on the board including Roger Martin, dean of U of T’s Rotman School of Management. Martin declined to comment, saying it would be inappropriate for a director to discuss a company in the press.

Other directors include Barbara Stymiest, former head of the TSX Group and ex-RBC chief operating officer, David Wylie Kerr, managing director of Edper Financial Group, John Wetmore, former president and CEO of IBM Canada, and Claudia Kotchka, a former executive with Procter & Gamble.

“The co-CEO model is absurd,” said Ian Lee, who teaches strategic marketing at the Sprott School of Management at Carleton University. “It’s like having two people as the president of a country. It just doesn’t work.

“Hierarchy is the name of the game. It produces clarity, unity of command,” Lee said.

But Richard Powers, a professor at the Rotman School of Management who runs a directors program, disagrees, saying RIM’s problems are products, marketing and growing competition, not governance.

But it’s governance that’s under a microscope.

“It has become a flashpoint for criticism. Either they change it to quell the speculation that it is part of the problem, or they get bought and the new owners make the changes,” Powers said, adding Lazaridis and Balsillie’s recent announcement to cut their salary to $1 a year doesn’t silence critics.

Powers believes change is inevitable, but when and how is up to the board of directors, with action likely sometime in the next two quarters.

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